Géant hypermarket business model emerges unscathed from downturn

Dubai: Shopping and malls are a benchmark of the UAE economy, and hypermarkets are a benchmark in shopping. But of course it is not as simple as that.

As the retail sector as a whole evolves in the aftermath of the downturn, there's an evolution in the operations of hypermarket companies.

One constant is location, which dictates the size of such markets.

Jean Marc Lebrun, chief operating officer of retail Arabia at Géant, explains his business in detail to Gulf News Financial Quarterly Review. The following are excerpts from the interview:

GULF NEWS: How has Géant fared in Dubai in the current downturn, including discounting policy?

Jean Marc Lebrun: For us the year 2009 was good. In Dubai the turnover was up by 12 per cent, and in the first four months of this year an increase of some 7-8 per cent might be recorded.

This [outcome] is due to the hypermarket concept, which is based on discounted prices and the range of products made available.

This concept responds better to crises than other retail operations such as those that target a high-end customer profile [luxury furnishings and fixtures, cars, jewellery, etc.].

Moreover, the drastic decrease in housing rents during the past 12 months has significantly contributed to [benefiting] the purchasing power of Dubai's customers.

I think therefore that the turnover of the hypermarkets and supermarkets in Dubai was not noticeably affected by the crisis.

However, I have to add that — with one hypermarket in Ibn Battuta Mall and one supermarket Le Marché in Arabian Ranches — we (Géant) may not reflect the true state of the economy.

We have continued to increase our turnover in food and maintain our market share in non-food [segments]. In this [non-food] segment customers' habits have drastically changed — they started inspecting and comparing prices.

The sales volume has increased but the turnover remains stable. Two years ago customers were spending Dh25 to Dh30 on a T-shirt. Now they are not willing to spend more than Dh15.

Another aspect is that we saw a lot of expatriates coming especially to Dubai during the boom time who purchased various home appliances.

Today this is much less in evidence. Besides, we at Géant only focus on the population living here and are not much affected by any variation in the number of tourists visiting.

Given a particular cultural/customer mix and the climatic aspects of doing business in the UAE, how has the company moulded its operations?

The multicultural aspect is not only reflected in our customers but also within our group. Our Dubai Géant team, for example, [covers] 27 different nationalities.

As mentioned previously, our concept is based on discount and choice. We have realised with time that UAE customers are actually less sensitive about their original food habits.

One of many examples would be that [it was assumed] our subcontinental customers prefer Basmati rice. About 18 months ago Basmati rice prices went through the roof, due to a decrease in Indian exports.

Consumers turned to Jasmin rice, which rose to be one of our best-selling items in only a few days. Thereby we can observe that our customers become more and more price-sensitive...

However, we insist on providing our customers with as much choice as possible even in ‘niche' products. If a customer finds a product in our hypermarket that [they] cannot find at our competitors, [they] will not only purchase this particular item but also all the other items [they] might need.

What about the mix of outlets in your growth strategy? Beyond hypermarkets and supermarkets, how do you see the growth in small, neighbourhood grocery stores?

We tightly link our expansion plans to multiple concepts: (a) the hypermarket concept is still successful in the Gulf, offering 60,000 different items on over 10,000 square metres to our customers — we have just announced we will open a Géant hypermarket in Yas Mall in Abu Dhabi; (b) ‘convenience' hypermarkets, with approximately 4,000 square metres and catering more to food items — we will start testing this concept in a couple of months from now in Al Ain; (c) supermarkets, with about 2,000 square metres; (d) convenience stores, with about 500 square metres — we are currently testing this concept in International City.

Small convenience stores are the new way to attract customers in Dubai. We have to wait for some time for new supermalls to open.